Treasuries Extend Pullback Amid Optimism About Greece

(RTTNews) - Following the sharp pullback seen in the previous session, treasuries saw some further downside during trading on Friday.

Bond prices showed a notable drop in early trading and continued to drift lower over the course of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged up 11.6 basis points to 2.147 percent.

With the sharp increases seen over the past two days, the ten-year yield largely offset the steep drop seen in the four previous sessions.

The continued weakness among treasuries came as traders expressed optimism Greece will finally be able to reach a new agreement with its creditors.

In a move seen as Greece's final bid to remain in the eurozone, the government offered a cash-for-reforms proposal to creditors that includes spending cuts and tax hikes in exchange for a third bailout.

Prime Minister Alexis Tsipras' request for at least 53.5 billion euros in bailout funds for the next three years was presented to the Greek parliament.

Eurozone finance ministers will meet on Saturday in Brussels to review the Greek request, followed by a summit of European leaders on Sunday to reach a final agreement.

"The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors," European Union President Donald Tusk told reporters. "Only then will we have a win-win situation."

Treasuries saw some further downside following remarks by Federal Reserve Chair Janet Yellen, who said it would be appropriate to begin raising interest rates this year.

"Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy," Yellen said in a speech in Cleveland.

She added, "But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step."

Meanwhile, Paul Ashworth, Chief U.S. Economist at Capital Economics, noted Yellen dealt with the problem of what to say about Greece, where the outlook is constantly changing, by largely ignoring the issue altogether.

The weekend's developments regarding Greece are likely to be a key driver of trading early next week, although U.S. reports on retail sales, inflation, and housing starts may attract attention as the week progresses.

Traders are also likely to keep a close eye on Yellen's semi-annual testimony before both the House Financial Services Committee and the Senate Banking Committee.